For NACHA’s Same Day ACH, The Debit Debut

In payments, some rollouts come with fanfare. Apple comes to mind. Fitness watches are a recent entrant of pageantry.

For NACHA, there’s a rollout of a different sort, with far-reaching impact on how, who and when consumers and enterprises see funds flow. No confabs here, or webcasts with smoke and mirrors and rock music. Think of it as a quiet sea change amid the financial landscape.

In an interview with PYMNTS’ Karen Webster, Jane Larimer, chief operating officer at NACHA, said that the implementation of Phase 1 of Same Day ACH has gone smoothly, with a live debut last September. She noted the financial services industry has done much preparation in terms of enhancing systems and processing, in tandem with significant testing. “We’re seeing robust use of same-day ACH credits,” said Larimer.

That assertion is backed up by the numbers. From September 2016 through July of 2017, said Larimer, there have been 42 million same-day ACH credit transactions, with a corresponding total of more than $57 billion. Amid the robust use cases, NACHA is seeing three that are prevalent thus far. One widely embraced use case comes through payroll processing for missed/emergency payroll or hourly or daily workers, with other uptake based on P2P payments and B2B payments. In this latter category, she said, B2B payments center around just-in-time payments, with firms hanging onto money longer before they send it out, which, in turn, helps cash flow.

For this calendar year, Larimer said NACHA is projecting 50 million transactions: “We are pleased with the volume so far … and we are expecting to see more use from same-day debits. We are excited for this to go live.”

As Phase 2 gets underway, just what is on deck? First, an explanation: The movement is, for debit transactions, an option to move away from overnight processing, where “classic ACH” transactions reside, to the two same-day windows now in place. Therein lies the lure for faster bill payments, Larimer told Webster.

With same-day debit, said Larimer, “consumers know their true balance faster.” This may prove especially useful with lower-income consumers, for whom knowing precisely how much money they have available in their accounts is critically important, surmised Webster.

The debit function will also aid in account-to-account transfer, where an account is debited to credit another account – a process that, again, moves faster and benefits consumers. That may hold especially true with investing, where folks may want to get money into accounts faster, with an eye toward jumping into certain markets and assets and deploying cash with speed.

Webster noted that by all appearances, the banks have been well-prepared for the debit debut. A lot of the prep work for debit, said Larimer, was done before credit went live last year.

From a receipt perspective, she continued, processors are ready, financial institutions are ready and – for firms of size and scope – all are ready to receive debit transactions, as receipt is mandatory. From an origination perspective, that process is not mandatory, but here again, many larger firms and financial institutions “are ready to go from day one.” Smaller firms that may have been slower to adopt same-day credit ACH, said Larimer, have been waiting on the sidelines for debit to bow, with the desire to do both at the same time.

This preparation sets the stage for the third and final phase, which goes live in March of 2018. Here, all financial institutions must make funds from same-day credits available by 5:00 p.m. local time – where, previously, rules simply mandated end-of-day processing. “This brings home the funds availability” piece of the payments puzzle, said Larimer, with additional benefits accruing to consumers. But then again, the practice is not an unknown one. A May 2016 survey by NACHA shows that 71 percent of financial institutions are already making end-of-day funds available.

But back to the immediacy of same-day debits: “In the beginning,” as same-day debit goes live, Larimer posited that “we may be seeing incremental volume.”

Financial institutions, she said, are likely to be a bit cautious at the outset to ensure that unintentional debits do not occur. “There’ll be a careful uploading,” she said.